CCI dismisses allegations of refusal to deal by chemists in West Bengal -closes case against Cipla and Macleods and Bengal Chemists & Druggists Association at prima facie stage

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CCI dismisses allegations of refusal to deal by chemists in West Bengal -closes case against  Cipla and Macleods and Bengal Chemists & Druggists Association at prima facie stage

Competition Commission of India (“CCI/Commission”), by way of two separate orders dated 10.05.2019 and 23.05.2019, has exonerated Bengal Chemist and Druggist Association (“BCDA”) (in both cases) and its two member pharma companies- Cipla Limited (“Cipla”) and Macleods Pharmaceautical Company (“Macleods”), respectively against allegations of collusion in restricting the supply of medicine to the informant.

Background and Allegations

The two separate information’s filed by Mr. Kalyan Chowdhary of M/s Kamala & Sons and Mr. Kuntal Chowdhary of M/s Kamala Agency (the two informants are brothers) against Cipla and Macleods, respectively, and BCDA, were based on the same premise that Cipla/Macleods (as the case maybe) is refusing to supply medicines to the informant under the directions of BCDA.

It was alleged that BCDA had instructed Cipla/Macleods (as the case maybe) to stop the supply of medicines to the informants (respective stockists) on account of complaint filed by one of the informant i.e. Mr Kalyan Chowdhary (brother of the other informant) before the National Company Law Tribunal (“NCLT”), Kolkata Bench regarding mismanagement in elections of Asanol Zonal Committee in 2013, which was decided against BCDA, even in subsequent appeals to the National Company Law Appellate Tribunal (“NCLAT”) and the Hon’ble Supreme Court. Allegedly, the two pharma companies stopped supply of medicines without any cogent reasons and did not respond to the representations made by the two informants enquiring about the refusal. It was further alleged that the informants were indirectly asked by a third party to settle the dispute with BCDA, in order to restore regular supplies.

Another allegation was that, during the initial days, the two pharma companies had started supplying the medicines to the respective informants only after BCDA issued an ‘introduction letter’ (allegedly a type of NOC) to the respective informants after receiving INR 50,000/- in cash under the guise of donation and this conduct amounted to imposing unfair and discriminatory practice.

CCI Prima facie view 

CCI, in both the cases, observed that the respective pharma companies i.e. Cipla and Macleods had not stopped supplying medicines to their respective stockists (informants) under any influence of BCDA, but due to their own habitual defaults in payments, and have even undertaken to supply the medicines if an advance payment (in view of the earlier incidents of delayed payments) is made on that behalf. Further, it was noted by the Commission that the stockistship of the informants was still subsisting with their respective pharma companies who had undertaken to supply medicines on orders placed, on receipt of advance payment. Accordingly, CCI held that the allegation against the pharma companies in stopping the supply of medicines on behest of BCDA was unsubstantiated.

With respect to the allegation on BCDA with respect to the cash donation (alleged to be NOC), CCI noted that both the informants had been doing business for years without any complaint regarding such cash donation and the ‘introduction letter’ had neither any mention of NOC or conditional clearance of stockistship nor any cogent evidence, and therefore the allegation of requiring NOC to become stockists was also not substantiated.

In both the cases, therefore, the respective pharma companies along with BCDA was exonerated and the case was closed under Section 26(2) of the Competition Act (“Act”).

It is pertinent to note that in the case against Cipla, the informant had filed an additional written statement revealing an alleged request (unsubstantiated) for NOC from certain Labanya Healthcare, which was already available with the informant, however he failed to submit the same either at the time of filing of information or even at the time of written statement, and instead, took his own time. This conduct coupled with the unsubstantiated allegations discussed above, as per the CCI, appeared to be an afterthought of the informant by which an attempt was made to give the commercial dispute between him and Cipla a color of competition issue.

Comment:

These two consecutive orders from the Commission exhibit a maturing of understanding of the supply chain constraints in the pharma sector. Earlier almost on every such allegation made by any individual chemist against the trade association and/or against the pharmaceutical company of restricting the market through the so called “NOC”, the Commission used to refer the matter for investigation by the DG. This seems to have been stopped at least for the time being as is clear from these two orders. It is a welcome trend and should continue .